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Vienna Institute: Albanian industry in decline for the third consecutive year, production shrank by 17.5% in three years

2026-08-15 11:58:18Biznes SHKRUAR NGA REDAKSIA VOX

Albania's industrial production fell for the third consecutive year in 2025, widening the gap between overall economic growth and industrial performance.

The latest data from the Vienna Institute for International Economic Studies (wiiw) shows that gross industrial production contracted by 2.6% in 2025, after falling by 7.5% in 2024 and by 8.4% in 2023.

Calculated on the annual changes published by the institute, the accumulated decline in industrial production over these three years amounts to about 17.5%. The pace of contraction has slowed significantly in 2025, but the indicator remains in negative territory, signaling that the industry has not yet entered a recovery phase.

The contrast with the economy as a whole is stark. Gross Domestic Product grew by 4% in 2023, by 4% in 2024, and by 3.7% in 2025. This means that the economic expansion of these years has been supported by other sectors, while industry has lost ground even in periods when the economy recorded relatively high growth.

The institute estimates that domestic demand was the main driver of the economy during 2025, with the strongest contribution from government consumption and investment, while household consumption provided a more modest boost.

According to the report, the continued decline in industrial production is a problematic signal for the structure of growth. Unlike services and consumption, industry has a direct role in exports of goods, employment, productivity and the creation of a more sustainable production base. The three-year contraction shows that economic growth has not been accompanied by a corresponding expansion of industrial capacities.

The weakness of the industry comes at a time when the Albanian economy has benefited from increased foreign investment. According to wiiw, foreign direct investment inflows increased from 1.498 billion euros in 2023 to 1.581 billion euros in 2024 and to 1.635 billion euros in 2025. However, production data suggests that the increase in these investments has not translated into a turnaround in the industry.

Meanwhile, the average gross monthly wage increased from 648 euros in 2023 to 769 euros in 2024 and to 860 euros in 2025. Rising wages improve workers' incomes, but, combined with population shrinkage and labor shortages, could increase costs and competitive pressure on manufacturing enterprises.

Albania's population, according to the series used by wiiw, decreased from 2.412 million inhabitants in 2023 to 2.377 million in 2024 and to 2.350 million in 2025. Within two years, the country lost about 62 thousand inhabitants, a development that simultaneously narrows the labor supply and the domestic market.

For the coming years, the Vienna Institute predicts a slight slowdown in the economy. Growth is expected to be 3.6% in 2026 and 3.5% in each of 2027 and 2028. / ekofin.al


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